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Thursday, April 18, 2024

Can BlackRock “Front Run” The Bitcoin ETF Approval? Bloomberg Explains

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With Bitcoin (BTC) spot ETFs seemingly just weeks away, some crypto investors are curious whether asset managers like BlackRock can “front run” their approvals using insider knowledge before their highly anticipated funds reach the market.

In an X space on Friday, Bloomberg ETF analyst James Seyffart cleared the air on what BlackRock can and cannot do to the Bitcoin market prior to approval – and how they’ll go about handling customers’ claims.

BlackRock’s BTC Position

According to Seyffart, ETF applicants will only begin buying BTC within days of their funds’ actual launch. This is in order to “seed” the ETF with funds in advance so that it’s ready to sell shares to investors once live.

“It’s not like they’re out there buying Bitcoin on their balance sheets specifically to maintain exposure,” said Seyffart. “I think there’s a lot of overhype around what they’re doing to ‘front run’ this stuff.”

The analyst clarified that BlackRock can still invest in BTC via other private products, such as their private Bitcoin trust – especially if its customers are purchasing BTC ahead of the ETF approval.

Indeed, inflows to alternative Bitcoin funds – including Canadian Bitcoin ETFs and futures-based ones in the United States – have broken records in recent months around excitement that an approval is coming.

While such ETFs have been denied time and again until now, Seyffart believes this time is different thanks to Grayscale’s court victory over the Securities and Exchange Commission (SEC) in August.

“In October we heard that the SEC was giving comments on their S-1 documents,” he added. “That’s when we went to 90% [odds of approval] because it was a complete and utter break of pattern.”

BlackRock revealed in its S-1 filing in October that it would seed its fund with $100,000 before launch. However, in an updated filing on Friday, that amount grew to a whopping $10 million, which is planned for January 3.

Incoming ETF Approval

Given the timing of pending comment periods and approval deadlines of rival applicants, Seyffart and other analysts expect a simultaneous approval of multiple Bitcoin spot ETFs between January 5 and January 10.

Bitcoin derivatives markets are looking bearish ahead of that approval date, suggesting that many believe the ETF approval will be a “sell the news” event.

Others, however – including former NYSE president President Tom Farley – believe money will “flood into the industry once an ETF is approved.

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